Explanatory note

The regulations make various amendments and modifications to the provisions of Part VII of the Companies Act 1989 (“the Act”) which concerns the effects of insolvency law, and the enforcement of certain rights and remedies, on the operation of certain financial markets. One effect of Part VII of the Act is to modify the way in which insolvency law applies in relation to certain contracts defined as “market contracts”. Regulation 3 of the regulations amends the definition of “market contracts” for the purposes of Part VII. Regulations 4 and 5 make provision concerning the exercise of voting rights at meetings of creditors and the ranking, in insolvency, of expenses incurred by insolvency officeholders in providing assistance under the Part. Regulation 6 restricts the circumstances in which an overseas investment exchange or clearing house recognised under the Financial Services Act 1986 (c. 60) is obliged to make a report under section 162 of the Act.

Regulations 7 to 15 make various provisions as to charges which are treated as “market charges” for the purposes of Part VII of the Act. Part VII modifies the way in which market charges are treated in an administration. Regulation 8 makes provision concerning the treatment of charges on land or any interest in land. Regulation 9 provides that certain charges granted in favour of The Stock Exchange in relation to short term certificates are to be treated as market charges. Regulation 9 also extends section 173(1)(c) of the Act to cover charges granted in connection with the allotment of securities of the kind mentioned in that section. Regulations 10 and 11 contain provision as to the extent to which charges granted in favour of an investment exchange or clearing house recognised under the Financial Services Act 1986 are to be treated as market charges. Regulations 12 and 13 make provision as to the circumstances in which and the extent to which charges of the kind described in section 173(1)(c) (“CGO Service charges”) are to be treated as market charges. (CGO Service charges are charges granted in connection with the assured payments system connected with the Central Gilts Office of the Bank of England.) Regulation 14 limits the disapplication, by section 175(1) of the Act, of sections 10(1)(b) and 11(3)(c) of the Insolvency Act 1986 (c. 45) in relation toCGO Service charges. Regulation 15 makes provision concerning the ability of an administrator or a receiver to recover assets subject to a CGO service charge or to a limited class of charge granted in favour of The Stock Exchange.

Regulation 16 makes provision treating certain contracts effected by a person as principal as effected in a different capacity from other contracts he has effected as principal. Regulation 17 restricts the rights and liabilities which the rules of a UK investment exchange recognised under the Financial Services Act 1986 must enable to be discharged by virtue of paragraph 2 of Schedule 21 to the Act. Regulations 18 and 19 make provision as to the persons who can apply to the court for an order under section 175(2) of the Act and as to the courts which have jurisdiction to hear proceedings under Part VII of the Act.